A worthwhile voice to consult on these economic controversies is my AEIcolleague John Makin, whose monthly Economic Outlook (available here) is widely read, inpart as John calls the macro shots for some very successful hedge funds.In his most recent Economic Outlook, “As Good As It Gets,” John arguesthus about the deficit:

“The loudest cries of criticism have been reserved for the sharptransition from a U.S. budget surplus of over $200 billion in the 2000fiscal year to a $380 billion deficit in 2003. Conservatives andliberals alike are already decrying an expected budget deficit of $500billion in the current fiscal year. Criticism of rising budget deficits,an old habit among would-be policy wonks trying to sound profound andprudent, is just silly at this point. It would be like criticizingfirefighters for pumping half the water out of a pond to put out a fire.Sure, there is less water in reserve for another fire, but why have thewater there in the first place if you don’t intend to use it to put outfires? Going from a budget surplus of 2 percent of GDP to a deficit,still below 4 percent of GDP, is appropriate in an economy with excesscapacity, especially when much of the swing comes from two rounds ofdemand-boosting tax cuts that simultaneously improve resourceallocation.”